6.6 C
London
Tuesday, March 5, 2024
HomeEconomyRussia's Economy Has Gone From Bad to Worse in a Matter of...

Russia’s Economy Has Gone From Bad to Worse in a Matter of Months. Here’s Where the Country is Feeling Pain the Most.

Date:

Related stories

Tajikistan Hands Prime Tract Of Land To President’s Relative Opponents Claim

The Tajik government has recently transferred thousands of hectares...

Courage in the Face of Tyranny – Remembering Alexei Navalny

“A concrete kennel, measuring 2.5m x 3m. Most often,...

Can Ukraine Still Win?

As Congress continues to delay aid and Volodymyr Zelensky...

Sandboarding and ancient temples: What to do in Peru if you’ve already seen Machu Picchu

From glacier hikes to exhilarating sandboarding, Peru is packed...

Will the Third Time Be the Charm for Tajikistan’s Thwarted Power Transition?

Infighting over the succession and growing frustration in the...
spot_imgspot_img

Russia’s economy just keeps getting worse – and there are plenty of ways to show that.

From plunging car sales to a dramatic collapse in its current-account surplus, there’s no way to hide Moscow’s troubles.

The country’s economic woes have multiplied since its invasion of Ukraine early last year. The conflict has triggered a wave of sanctions from the Western world. Some have even blamed Russian President Vladimir Putin for inflicting so much pain on the nation, with Yale researchers saying he’s “cannibalizing” Russia’s economy in his urge to conquer Ukraine.

“The lion’s share of the economy is controlled by the state, the energy and financial sectors, and Putin is taking from the seed capital of those businesses to use as a cookie jar for his war chest,” researchers Jeffrey Sonnenfeld and Steven Tian said.

Russians are buying fewer cars

Russia’s car industry is one part of the economy that’s being squeezed.

Insider’s Phil Rosen reported that car sales in Moscow have tanked by nearly 75% since the Ukraine war broke out. The decline has been fueled by a mix of three factors: soaring prices, decreasing supply, and deteriorating consumer sentiment.

“Russians are just buying less cars, period,” Tian said. “That speaks to the weakness of the consumer in Russia. This is as close to a proxy to deteriorating consumer sentiment as there is, and the story it tells is profoundly distressing. Russians just aren’t spending money.”

At the same time, the number of Russians buying foreign-branded cars – typically viewed as luxury purchases – has neared a standstill. Instead, consumers are buying locally sourced cars, many of which are riddled with mechanical issues.

Plunging exports

Another sign that Russia’s economy is flailing is the dramatic collapse in its current-account balance.

Moscow’s central bank posted a 93% year-on-year drop in its current-account surplus for the April-June quarter. it fell from a record $76.7 billion to $5.4 billion.

The rough financials show how badly Western sanctions are biting the country, particularly its key energy sector where its oil-and-gas exports have taken a huge hit after price caps and bans were imposed.

Energy export revenue

Moscow garners a big chunk of its revenue from sales of oil and gas products, but Western penalties have eroded that income stream.

In June, Russia’s Finance Ministry said that revenue from oil-and-gas taxes fell 36% compared to a year ago to about 571 billion rubles, and that profits from crude and petroleum products tumbled 31% to 426 billion rubles.

Ruble in freefall

Adding to Russia’s troubles is a tumbling ruble. The country’s currency slumped to a 15-month low of 94.48 against the dollar earlier in July, triggered by capital flight, shrinking tax revenues, and declining central-bank reserves.

“The ruble doesn’t have anywhere to go but down,” Konstantin Sonin, a University of Chicago economist, said in a tweet.

Concerns about the currency’s volatility have prompted a wave of domestic withdrawals from the country’s central bank, amounting to over $1 billion. The bank run was mainly fueled by the recent Wagner revolt.

Russia’s weakening currency has forced the country to take desperate measures. Recently, Russia’s foreign minister urged Southeast Asian countries to dump the dollar and use local currencies to conduct trade.

Source : Yahoo!

Subscribe

- Never miss a story with notifications

- Gain full access to our premium content

- Browse free from up to 5 devices at once

Latest stories

spot_img